Exchange-Rate Policy Attitudes: Direct Evidence from Survey Data

IMF Staff Papers 55, 3 (September 2008): 417-444

40 Pages Posted: 3 Jan 2008 Last revised: 22 Feb 2013

See all articles by J. Lawrence Broz

J. Lawrence Broz

University of California, San Diego (UCSD) - Department of Political Science

Jeffry Frieden

Harvard University

Stephen J. Weymouth

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy

Date Written: December 31, 2007

Abstract

Analyses of the political economy of exchange-rate policy posit that firms and individuals in different sectors of the economy have distinct policy attitudes toward the level and the stability of the exchange rate. Most such approaches hypothesize that internationally exposed firms prefer more stable currencies, and that tradables producers prefer a relatively depreciated real exchange rate. Sensible as such expectations may be, there are few direct empirical tests of them. We offer micro-level, cross-national evidence on sectoral attitudes over the exchange rate. Using firm-level data from the World Bank's World Business Environment Survey (WBES), we find systematic patterns linking sector of economic activity to exchange-rate policy positions. Owners and managers of firms producing tradable goods prefer greater stability of the exchange rate: in countries with a floating currency, manufacturers are more likely to report that the exchange rate causes problems for their business. With respect to the level of the exchange rate, we find that tradables producers - in particular manufacturers and export producers - are more likely to be unhappy following an appreciation of the real exchange rate than are firms in non-tradables sectors (services and construction). These findings confirm theoretical expectations about the relationship between economic position and currency policy preferences.

Keywords: international finance, exchange rates, exchange rate regimes, open economy macroeconomics

JEL Classification: F30, F31, F33, F36, F41

Suggested Citation

Broz, J. Lawrence and Frieden, Jeffry and Weymouth, Stephen J., Exchange-Rate Policy Attitudes: Direct Evidence from Survey Data (December 31, 2007). IMF Staff Papers 55, 3 (September 2008): 417-444. Available at SSRN: https://ssrn.com/abstract=1080297 or http://dx.doi.org/10.2139/ssrn.1080297

J. Lawrence Broz (Contact Author)

University of California, San Diego (UCSD) - Department of Political Science ( email )

9500 Gilman Drive
Code 0521
La Jolla, CA 92093-0521
United States

HOME PAGE: http://pages.ucsd.edu/~jlbroz/

Jeffry Frieden

Harvard University ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Stephen J. Weymouth

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

HOME PAGE: http://faculty.msb.edu/sw439/

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